Bailout purgatory is bad for everybody, apart from the banks, their shareholders and their unsecured creditors. As Roubini points out, the government has been siphoning money into banks via capital injections, loan guarantees and financing with no strings attached.

Give us Madoff! Give us Madoff!  “Oil rises to $39 on Bernanke comments…”  “Asian stocks rise after Bernanke remarks…” When they turned out the lights and closed the doors in New York last night, the Dow had lost 25 points and oil had gone down to $37.

The sub-prime catastrophe has spread far beyond the United States. Certain foreign banks have already been swept up into this sub-prime mess. And it’s hardly beyond the realm of plausibility that more foreign banks could fail.